Republicans and Democrats have fundamentally different approaches to changes in the tax code and we’re lucky that two big proposals are on the table to highlight the contrast. Exhibit A is Gov. Paul LePage’s big overhaul that he’s embedded in his two-year budget proposal. There’s been a lot written about the tax package, but at […]

Republicans and Democrats have fundamentally different approaches to changes in the tax code and we’re lucky that two big proposals are on the table to highlight the contrast.

Exhibit A is Gov. Paul LePage’s big overhaul that he’s embedded in his two-year budget proposal. There’s been a lot written about the tax package, but at its core is a belief that high income taxes, corporate taxes, estate taxes and others that hit the more affluent are an impediment to economic growth.

Then there’s Exhibit B, President Obama’s soon to be unveiled tax plan. Here’s how the Washington Post has described it:

“Obama will propose raising the capital gains and dividend tax rates to 28 percent for high earners; imposing a fee on the liabilities of about 100 big financial institutions; and greatly broadening the amount of inherited money subject to taxes.

Obama will also seek to boost private retirement savings by requiring employers without 401(k) plans to make it easier for full-time and part-time workers to save in individual retirement accounts, which could assist as many as 30 million people. The administration would provide small employers tax credits to cover costs.”

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Kansas Republican Gov. Sam Brownback was lauded by conservative activists for his aggressive tax cutting agenda during his last term. However, Brownback has become something of a cautionary tale for would-be imitators.

Kansas faces massive revenue shortfalls, and now, Brownback is pushing a plan to raise the sales tax while throttling down the mechanism designed to reduce the state’s income tax until the rate eventually reaches zero.

There was a lot of speculation that LePage might pursue the Brownback path before the governor released his budget. But now it’s pretty clear that LePage has chosen what I’ll call the Reverse Kansas. Instead of cutting income taxes first and waiting for what conservatives believe will be a deluge of economic investment, LePage is essentially proposing to raise sales taxes first and use those revenues to pay for an income tax cut that won’t fully phase in until later.

As for the ratchet mechanism that Brownback put in place, Maine already has that. In 2012 it was enacted as L.D. 849. The only difference is that the Maine mechanism is embedded within the surplus cascade which assigns unappropriated surplus revenues to a list of programs. It just so happens that reducing the income tax has been forced down the priority list, so there’s never been enough revenues to activate the ratchet.

LePage has said that he wants to get rid of the cascade. However, his finance team indicated during a budget briefing that the administration wants to preserve the income tax ratchet. That will be part of the budget negotiations of the Legislature.

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There have been some questions about the LePage administration’s claim that the governor’s tax overhaul will save Maine families $300 million. The number can’t be found in the fiscal note, which was presented last week.

Below is how Michael Allen, the governor’s tax policy director, explained it in an email that he sent Friday evening:

“The use of the fiscal note would be difficult for comparison due to the fact that the fiscal note is calculated using a fiscal year for legislative budget purposes. However, to be more reflective of the real life of an average Maine family, the Office of Tax Policy calculated the amount of the direct, net tax burden reduction based on individual income tax estimates for tax year 2019; sales tax estimates for calendar year 2019; property tax estimates for 2019 (property assessed on 4/1/19); and deaths occurring in calendar 2019.

MRS [Maine Revenue Services] used very conservative models when calculating the projections of the tax burden reduction. Following is the breakdown of the overall figure:

If those emails look familiar, it’s because the same messages were a centerpiece in colleague Colin Woodard’s investigation into how Bush’s Foundation for Excellence in Education played a role in helping the LePage administration craft its education policy, specifically its interest in virtual schools.

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It should be a relatively quiet day at the State House as lawmakers and state workers observe Martin Luther King Jr. Day. Legislative committees will continue to hold orientation meetings most of the week. The committee work should soon pick up the pace, though. Approximately 35 bills have already been referenced to committee and a lot more are on the way.

Speaking of bills, be sure to check out the list of titles that were posted on the legislative website. There are some curious requests out there, including Sherman Republican Rep. Ricky Long’s bill to study dividing Maine into two states (Yeah, you read that right.).

There’s also a bill to make the labrador retriever the official state dog. Something tells me that bill could be as divisive as the 2011 proposal that attempted to name an official dessert. It took lawmakers 52 days for LD 71, which became known as the whoopie pie bill, to go from public hearing to its first vote in the House.

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